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IRS updates special per-diem rates for business travel

Business travelers who incur expenses while traveling away from home have new per-diem rates to use in substantiating certain of those expenses (Notice 2017-54). The new rates will be in effect from Oct. 1, 2017, to Sept. 30, 2018. The IRS on Tuesday provided the 2017–2018 special per-diem rates, including the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method.

The updated rates are effective for per-diem allowances paid to any employee on or after Oct. 1, 2017, for travel away from home on or after that date, and supersede the rates in Notice 2016-58, which provided the rates for Oct. 1, 2016, through Sept. 30, 2017.

Rev. Proc. 2011-47 provides the general rules for using a federal per-diem rate to substantiate the amount of ordinary and necessary expenses for lodging, meals, and incidental costs paid or incurred for business-related travel away from home. Taxpayers using the rates and the list of localities in Notice 2017-54 must comply with the rules in Rev. Proc. 2011-47.

Incidental expenses

Since 2012, incidental expenses have included only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. The per-diem rate for the incidental-expenses-only deduction remains unchanged at $5 per day for any locality of travel.

Transportation industry

The special meals and incidental expenses rates for taxpayers in the transportation industry are $63 for any locality of travel in the continental United States (CONUS) and $68 for any locality of travel outside CONUS, unchanged from the last two years.

High-low substantiation method

For purposes of the high-low substantiation method, the per-diem rates are $284 for travel to any high-cost locality and $191 for travel to any other locality within CONUS, slightly higher than last year.

The amount of these rates that is treated as paid for meals for purposes of Sec. 274(n) is $68 for travel to a high-cost locality and $57 for travel to any other locality within CONUS, unchanged from last year.

The notice contains a list of the localities that are high-cost localities (localities that have a federal per-diem rate of $238 or more, slightly higher than last year) for all or part of the calendar year.

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The package includes final regulations, guidance on how to calculate W-2 wages, a safe-harbor rule for rental real estate businesses, and new proposed rules on the treatment of previously suspended losses.

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